The number of repossessions rose in the third quarter, raising concerns about the impact of last week’s interest rate rise on borrowers struggling to make ends meet. Data from UK Finance has revealed that cases of repossession edged up from their record low level of 1,800 in the second quarter to 1,900. The number of […]
The number of repossessions rose in the third quarter, raising concerns about the impact of last week’s interest rate rise on borrowers struggling to make ends meet.
Data from UK Finance has revealed that cases of repossession edged up from their record low level of 1,800 in the second quarter to 1,900.
The number of loans in arrears was 2% lower than in the second quarter of the year at 88,300 – the lowest level since records began in 1994.
The number of owner-occupied properties taken into possession increased in the third quarter from 1,100 to 1,300, while buy-to-let repossessions fell from 700 to 600.
A total of 83,300 owners-occupiers were in arrears of 2.5% or more of the balance, down from 85,300 in the second quarter.
While the number of mortgages in arrears fell across all bands, those owing 10% or more of the outstanding balance rose from 25,500 to 25,600.
The Bank of England raised interest rates last week for the first time in more than decade from 0.25% to 0.50%.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “With more rate rises a possibility, home repossessions may well increase further.
“We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.
“Borrowers must plan ahead and consider how they will cope if interest rates do rise further.”
The biggest losers of an interest rate rise are likely to be those on variable rates.
According to the Nationwide Building Society, a 0.25% rise in interest rates would see the payment on a £250,000 mortgage go up by £34.03 a month, or 408.36 a year.
This is based on a term of 20 years and an increase in variable rate from 4.56% to 4.81%.
Around eight million Brits have never seen an interest rate rise, meaning they could potentially be underestimating the consequences of a hike on their mortgage payments.
According to the Financial Conduct Authority, one in seven homeowners would struggle to pay their mortgage if repayments went up by £100 or less per month.
A recent survey by Which? also found that one in 20 people on variable rate mortgages believe a rise would leave them struggling financially, while 31% feel their day-to-day living would be impacted.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures show on the one hand that low interest rates have helped keep arrears in check but on the other, possessions edging up is evidence of increased lender confidence in selling properties owned by those in greatest debt.
“Looking forward, upward pressure on interest rates is likely to increase arrears as borrowers ‘on the margins’ always tend to be most vulnerable.”
